Nicola Sturgeon has appealed to the UK Treasury not to cut the benefits of low income health and social care workers who receive the Scottish Government's £500 thank-you payment.
The Tories will tax as well as take back benefits from workers who get the one-off payment to thank them for their efforts during the Covid-19 pandemic.
It emerged that for workers who receive Universal Credit, their benefit amount will be reduced if they accept the Scottish Government cash.
The decision was condemned as “cruel” and “Scrooge-like”.
Asked about the move at the Scottish Government's daily briefing today and whether there was anything her administration could do to protect the full value of the payment, the First Minister appealed for the Treasury not to cut the benefits of those receiving the thank you bonus.
She also renewed her appeal to the Tories not to tax the payment.
"The way to protect the full value is for the UK Government to exempt it from tax and from any impact on benefits.
"It's been said that we can just top up the amount that will be taken away in tax, but ... we don't have any the details about everybody's tax liabilities and circumstances that is information that is held by HMRC so on a practical level it is really difficult to do that."
Details of the bonus were announced by the First Minister during her speech to the SNP’s annual conference at the end of November.
Every full-time NHS staff member and adult social care worker in the country will be eligible.
The £500 bonus scheme will be funded from the Scottish Government's Covid-19 support package and applies to employees employed since March 17.
However, while the Scottish Government can make the payment, they don’t have powers over taxes to make it tax-free.
In her speech, the First Minister urged the Prime Minister to act.
"The Scottish Government is choosing to do this now from our own resources. We are asking nothing of the UK government - with one exception.
"Because we don’t control the full tax and benefits system, we don’t have the power to make this payment tax free. But Prime Minister, you do.
"So I am asking you this: Please allow our health and care heroes to keep every penny of Scotland’s thank you to them. Do not take any of it away in tax.”
But the Treasury rejected her request telling Sturgeon that if she wanted the payment to be tax free that she would then need to pay the tax.
A spokesperson pointed out at the time that any income tax levied would ultimately be collected by the Scottish Government.
He said: “We provided over £8.2bn of extra funding for the Scottish Government this year to support people, businesses and public services.
"The income tax on these payments is paid to Scotland, not Westminster – and the Scottish government has the powers and funding to cover the tax owed on the payment if it wishes.”
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